Klinefelter: By the Numbers

By Danny Klinefelter
DTN Farm Business Adviser

Pita Alexander is the best known and most respected farm business accountant/consultant in New Zealand. He is also something of a homespun philosopher. After reading several of his articles and the texts of several of his presentations, I contacted him to ask permission to reprint selected quotes. He graciously agreed.

Two things struck me as I read the material. The first was that I endorsed nearly everything he said and, second, it was interesting just how similar management problems and best practices are wherever you live around the world.

In this and my next article I have selected 46 out of several hundred of my favorite quotes. I hope you'll enjoy them and find them as insightful as I did.

1. One of the greatest pieces of economic wisdom is to know what you do not know.

2. It is natural to dwell on things that have gone wrong. The key, though, is to focus on remedies and solutions. The top quartile are obstacle removers. Remove obstacles, don't just keep walking around them indefinitely.

3. Let's not beat about the bush. The whole point of being in business is to be profitable. The whole point of being profitable is because it gives you choices. Some people, though, want to have their choices before they are profitable, but that is invariably trouble. Get the sequence right -- profits, then choices. I am on a constant learning curve from contact with the top quartile in the practice and always put on my listening and learning overalls with these couples and suggest you do the same.

4. Generally, one mistake will never kill you -- it is the same mistake over and over again that kills you. Many in the bottom quartile do exactly this.

5. Most industries -- and farming is no exception -- need people who can think, plan and act in that order. The sum of these three together is infinitely more valuable than the sum of their individual parts. Make sure you are in this camp.

6. As employers we all tend to underpay our top performers and overpay our under-performers. This is very unfair -- make sure it is not happening in your business.

7. In any new on-farm or off-farm venture, develop an exit strategy. Those in the bottom business groups don't have a Plan B and they don't have a Plan A either. What they have is a Plan W -- that is they are going to "wait" to see what happens or more likely they will wonder that happened.

8. In any industry it is a good sign when you want to be a preferred employer -- each of us need to build our reputation as an outstanding employer.

9. Spend your time before you spend your money -- get the sequence the right way around.

10. Do you know where you want to be in 3-, 5-, 7-years' time? Don't tell me you don't have time to think about issues like this because if that is your answer, you don't deserve to be running the business. Develop a plan and a strategy -- get top advice, fine-tune the plan, celebrate the results, pause only briefly, regroup and set new goals. Is this easy? No. Is it straightforward? No. Does it always work? No. Have we found a better way? No.

11. We need to ask the question, what is this business for?

--What are we aiming at?

--What is the point of doing this?

--Who are we doing it for?

--What and where is the market?

--Who is the customer?

--Should we be doing something else?

12. In some ways being self-reliant is a marvelous trait, but in a business sense it is almost foolish. We all need to surround ourselves with the best team of advisers -- including peers -- that we can muster.

13. Unless your comfort zone is highly profitable or you are going to live to be 200 years old, then don't linger long in your comfort zone. Comfort zones don't tend to have any business attributes.

14. Make sure you at least listen to someone else's version of the plan or event, even if you do not recognize it -- that is what lateral thinking is all about.

15. Who is the most dangerous person in the business? The articulate incompetent. They are around, they survive and they are breeding.

16. Very often the most boring parts of your business are the most profitable. Burn this into your memory banks because I have struck this many times.

17. If the pace of change outside your farm gate is greater than the pace of change inside the gate, then there is a problem. The time frame for a problem to develop into a crisis is going to be much shorter over the next 10 years than it has been over the last 10 years.

18. Minimizing losses is every bit as important as maximizing profits. Farming couples need to maximize their profits at the top of their economic cycle and not feel the slightest bit embarrassed about it, and minimize their losses at the bottom of their economic cycle and not feel too annoyed about it.

19. Your success won't be measured so much by how high you fly, but how high you bounce. Farming and business is volatile and from time to time you will bounce; but with financial reserves, risk management policies and top advice, you need to make sure you bounce and bounce well.

20. You and I need to learn to fail successfully. To avoid future mistakes we need to experience, but to get experience we need to make mistakes. Don't think of mistakes as failure, think of it as another stepping stone.

21. Deal with the cause of the problem, not a symptom of the problem. Focusing on your working capital is sometimes like looking at the oil spots on your driveway -- the problem is somewhere else.

22. When you have put good working colleagues and/or employees in place around you, then don't pull rank on sticky issues. One of the worst things you and I can do is pull rank when the going gets though. If they are good enough to work with you, they are good enough to listen to. Remember it is light that is required, not heat. Pulling rank is part of the heat process. In any discussions with my family, I invariable provide the heat and they invariably provide the light.

23. Sometimes there is a window of opportunity available to you. Don't wait for the window to get to a size that you can drive a bus through. Windows of opportunity are all about maximizing profits and minimizing losses and each is as important as the other.

24. It is not a comment that goes down well, but flying with the eagles and not scratching with the turkeys is a very real comment in the any business. Make sure you are mixing with other successful people in your industry and not hanging out with the losers -- this is essential stimulation and motivation.

25. To me, zero-based budgeting has just as much application in good times as in bad times, but we generally think of it as a concept when the going gets tough. The concept asks the question as to what would actually happen if that particular cost was not incurred ---it is always a good question if only because it makes us think and focus on the issues. Sometimes the cost is a crucial part of the chain in producing the maximum gross farm income -- sometimes though the cost is recreational or aesthetic or traditional.

26. Hardly anybody falls into a farming disaster overnight and hardly anybody gets out of a farming disaster overnight. Most farm financial disasters are long-distance events; that is the problems start years earlier, the race is all downhill and the signals come through loud and clear over time but nobody listened to pick them up. One of the greatest misconceptions in this world of ours is that we assume that couples in financial trouble will be closely monitoring their financial affairs. In practice though, this is precisely what they tend not to do. The message for all of use is clear here--that is, face the realities early on and bite the bullet on these hard decisions. Remember it is temper that gets most of us into trouble and pride is what keeps us there.

EDITOR'S NOTE: Danny Klinefelter is a professor and extension economist with Texas AgriLIFE Extension and Texas A&M University where he teaches a beginning farmer program. He is also the founder of a mid-career management course for executive farmers called TEPAP. Hear Klinefelter and other finance experts coach farm beginners at a special DTN University course in Chicago Dec. 7, "Risk Management for Rookies." Go to www.dtnagsummit for details.

(MZT/CZ)

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